A Memo to European Bank Investors

Macrostrategy's David Goldman sees risks in holding bank debt in Spain. But he's bullish on U.S. bank preferreds.

We expected Europe's banking crisis to resurface in Spain rather than in tiny Cyprus, and recommended caution in November about owning the junior bank liabilities of European banks.

Cyprus really is a special case, more like Iceland than Spain, and the market response is greatly exaggerated. Nonetheless it points to exaggerated optimism in the valuation of European bank sub debt, which has rallied enormously since mid-2012.